Why Is Financial Literacy Such an Under-Taught Skill?

In the United States, we’ve historically done a terrible job of educating our young people in the realm of personal finance. One study found that only one-third of American adults can pass a basic financial literacy quiz, which asks questions related to interest rates, budgeting, and basic types of investments.

And think about it anecdotally—did you ever have a class in middle school or high school that taught you how credit cards work, or how to prepare a monthly budget? If you did, you’re in a tiny minority (though thankfully, mandates for economics and financial literacy courses in high school are rising).

So why is financial literacy such an under-taught skill? And why should we care?

Why It Matters

Financial literacy allows people to build a better financial future for themselves, enabling them to get out of debt, build wealth, and spend more money in the economy. The financially literate, and therefore financially successful, tend to spend more money, contribute more to society, and provide a better education for their children. Ultimately, that means a better-educated population in the realm of financial literacy would be good for the economy, and could help create a more equitable society. Debt and poverty could be minimized, and standards of living could skyrocket.

The Complicating Factors

So why aren’t we spending more time and energy on financial literacy classes?

The answer is complicated. For starters, only 17 states currently mandate some kind of financial literacy course, and even then, it’s confined to 1 or 2 years of study, if that. This isn’t enough time for the lessons to truly take hold. On top of that, many children are taught irresponsible spending habits and a lack of regard for money from their parents, resulting in a perpetual, multi-generational cycle of apathy toward personal finance.

Some have even argued that the number of financial education courses in schools is adequate, but the lessons aren’t taking because they aren’t teaching it the right way. The answer here is that kids are given all the information they need to make better financial decisions, but they aren’t making them.

How We Can Improve

So what practical steps can we take to improve our collective understanding of personal finance, in our own generation as well as future generations?

Create and support more independent sources of information. There are already valuable sources of information online, teaching individuals basic financial terminology and concepts related to budgeting and investing. Making these resources more accessible can expose a greater portion of the population to the basics of financial literacy. For example, we can produce and promote more content, and ensure that content is written at a vocabulary level that anyone can understand.

Teach children the basics from an early age. As parents, we can do more to teach kids the basic concepts of personal finance from an early age, whether it’s giving them an allowance they can budget for their personal purchases, or playing Monopoly to teach them the power of financial transactions as they accumulate over time. This responsibility falls on parents, so it won’t work for portions of the population who are already behind on financial literacy.

Include coursework in personal finance. Including more classes throughout elementary, middle, and high school is also important. Ideally, messages of financial literacy would be reinforced at home and in school, every year throughout childhood, to maximize the chances of retention (and gradually scale to more complex concepts).

Offer community classes and awareness campaigns. If schools and homes can’t provide adequate resources to improve financial literacy, we can use the power of our communities to teach it. Offering free (or inexpensive) community classes can be a good way to teach multiple generations the value of financial literacy at once, and awareness campaigns can help foster support from teachers and parents to prepare the next generation for responsible personal finance.

It’s hard to teach a skill to an entire population all at once, but we can make changes in our own lives to support a future generation of citizens. The sooner we start prioritizing financial literacy from an early age, the sooner we’ll start reaping the economic benefits.